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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary
Minnesota Housing Finance Agency

Selected Scope Financial Audit

For the Two Years Ended June 30, 1993


Public Release Date: September 9, 1994 No. 94-45

Agency Background

In 1971 the state legislature created the Minnesota Housing Finance Agency (MHFA) to increase the ability of low and moderate income Minnesotans to obtain safe, decent housing. MHFA provides funds to assist in the purchase, rehabilitation, and rental of housing by qualifying individuals. Mr. James Solem served as commissioner from 1978 to June 30, 1994. On July 1, 1994, Ms. Katherine Hadley, the former deputy commissioner, was appointed to the position of commissioner.

Selected Audit Areas

Purchases of Single Family Mortgage Loans

MHFA has effective controls over purchasing single family mortgage loans. Clear lender policies and internal loan review procedures help protect the agency from purchasing ineligible mortgage loans. FHA insurance, VA guarantees, and primary mortgage insurance minimize the risk of loss due to borrower defaults. Complex computer applications help employees control payments to participating lenders.

Repayments of Single Family Mortgage Loans

MHFA has established controls over the repayments of single family mortgages. Although FHA insurance, primary mortgage insurance, and VA guarantees minimize MHFA's losses from most borrower defaults, it must provide diligent and timely oversight of the repayment process to ensure that it does not violate the bond resolutions and that it has sufficient funds to meet debt service requirements. For the most part, we found MHFA's oversight of these areas to be adequate. However, we cited a few instances when MHFA was not enforcing timely correction of errors identified in the loan service records.

Administrative Costs

Minnesota statutes limit the use of funds for general administration of agency programs by MHFA. The amounts recorded by MHFA in its administrative accounts for fiscal years 1992 and 1993 are within the statutory limitation. The statute excludes a number of types of expenditures, including all "professional and other contractual services" from the administrative cost limitation. However, the statute does not specify the types of expenditures to include in the cost ceiling. We believe that the lack of specifying the costs subject to the limitation diminishes the effectiveness of statutory control.